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FY 99 Budget
III. B. Affordable Housing

Not all Americans can afford the benefits for homeownership. In fact, the need for affordable housing is at an all-time high. In 1995, 5.3 million low-income families had "worst-case" needs - that is, spent more than half their income on rent or lived in severely substandard housing. This 5.3 million does not even include the Americans who are literally homeless, since these families and individuals cannot be counted by the biannual survey of housing conditions conducted by HUD and the Census Bureau. The best estimates suggest that 600,000 individuals and families are homeless on any given night.

This budget puts housing at the top of HUD's agenda, where it rightfully belongs. A centerpiece of HUD's affordable housing agenda is a proposal to provide 100,000 new incremental rental vouchers. Unlike previous years, however, HUD is proposing to martial new housing resources for specific strategic purposes: 50,000 for helping welfare recipients make the transition to work; 34,000 for homeless persons and families who are ready and able to make a transition into permanent housing in the private rental market; and 19,000 for the elderly, family unification and other targeted purposes.

Budget Authority FYs 1997-1999
(Dollars in Millions)
1998 1999 1999 vs 1998
Homelessness Assistance Grants $823 $958 $135
103,000 New Vouchers 0 585 585
50,000 Welfare to Work
0 [283] [283]
34,000 Homeless Individuals
0 [192] [192]
8,800 Elderly and Disabled
0 [50] [50]
10,600 General
0 [60] [60]
Revitalization of Severely Distressed Public Housing (HOPE VI) 550 550 0
Public Housing Operating Fund 2,900 2,931 a/ 31
Public Housing Capital Fund 2,500 2,550 50
Drug Elimination Grants 310 310 0
Housing Opportunities for Persons with AIDS (HOPWA) 204 225 21
Elderly and Disabled 839 283 (556)
Indian Housing Block Grants 600 600 0
Regional Opportunity Counseling 0 20 20
Administrative Fee Bonus 0 9 9
Total, Grants 8,726 9,021 295

Notes: Bracketed amounts do not add into totals. Item in parentheses reflects reduction.

a/ Funds 100% of Public Housing Performance Funding System (PFS), utilizing $113 million in anticipated carryover funds.

1. Homeless Assistance Grants

Reducing homelessness is one of the Secretary's top priorities. In 1993, HUD initiated a new strategy for reducing homelessness, requiring communities to establish "Continuum of Care" strategies. A Continuum of Care strategy is a coordinated community approach which focuses on ensuring that homeless persons move from homelessness into jobs and permanent housing.

HUD's innovative Continuum of Care approach ensures the specific needs of all homeless persons are served, including those living with mental illness, those in need of substance abuse treatment and those in need of job skills. Continuum of Care strategies focus on filling existing gaps in housing or other services within a community that are necessary to help individuals and families move from temporary homelessness and shelters to permanent housing. The Plan must, therefore, be inclusive of and utilize the services of public, private and non-profit participants within a community.

The 1999 Budget requests a total of $1.15 billion, an increase of almost 40 percent over the 1998 enacted level of $823 million. This includes $958 million for homeless assistance grants and $192 million for 34,000 vouchers. It is the highest level ever requested for this program and if enacted, would reverse the trend of level funding that has occurred over the past three years.

The 1999 Budget recognizes and attempts to address the growing backlog of continuum of care needs for homeless people. In 1997, demand for homeless funds exceeded availability by 240 percent.

Moreover, any increase in funding -- combined with recent policy changes -- has a tremendous impact on the number of needy individuals receiving assistance and will help them achieve independent lives, to the extent possible. A recent Columbia University study concluded that the number of individuals and families that have been assisted in moving to permanent housing increased by 14 times between 1992 and 1995 while federal funding only doubled.

In 1999, the program will accelerate assistance in two major areas. First, the increase in grants will provide for an additional 125,000 to 140,000 transitional housing slots linked, when appropriate, to services such as health and mental health care, job training and child care, and substance abuse treatment. It is estimated that another 59,000 to 62,500 permanent units would be available.

However, when families are ready to graduate from emergency and transitional homeless programs to permanent housing, affordable permanent housing is too often not available. Therefore, HUD proposes the inclusion of $192 million for 34,000 additional incremental Section 8 vouchers targeted to helping graduates move from homeless facilities into permanent residences. This will help ensure that when graduates are ready to leave the Continuum of Care and enter private housing, affordability will not be the barrier that inhibits this progress.

By assisting homeless individuals and families, including those with disabilities, in moving to permanent housing, shelter and services are freed up for other homeless persons to achieve self-sufficiency. Also, while transitional assistance provides good progress - an average stay is 9 months - some rental assistance with services is key to the restoration of dignity and independence that is critical for children and parents.

A single voucher over a period of several years may well serve many individuals or families. Some preliminary good news is that recipients of vouchers for permanent housing are not necessarily permanently dependent. As noted above, shelter with services does result in some families continuing upward. Also, an evaluation of the Shelter Plus Care program for homeless persons with mental illness, substance problems, and/or AIDS, identified progress toward independence when the mental illness is managed or the substance abuse problem is overcome.

2. Housing Opportunities for Persons with AIDS (HOPWA)

The 1999 HUD Budget requests $225 million, an increase of 10 percent, or $21 million, over the 1998 level of $204 million.

The number of eligible jurisdictions has grown each year and that trend is expected to continue. Unfortunately, the Centers for Disease Control reported 69,101 new cases of AIDS in 1996 alone. An increase in funding is, therefore, essential to keep pace with the need and the increase in jurisdictions eligible for funding. The only alternative is to require that all jurisdictions take a significant reduction in assistance.

An increase in funding is also needed because individuals with AIDS are living longer, due in large part to recent improvements in drug therapies. The increase in longevity puts additional stress on personal financial resources, which in turn means that an individual's ability to afford adequate housing is significantly diminished. The HOPWA program is specifically designed to assist needy individuals in finding and keeping adequate housing.

If enacted, the funds would support 41,500 units of housing assistance and would provide related services to approximately 74,875 individuals.

3. Section 8 Assistance

In addition to the 50,000 Welfare-to-Work vouchers and the 34,000 homelessness assistance vouchers described above, HUD is proposing an additional 10,650 vouchers for family unification, participants in witness protection programs, and other purposes.

In addition, HUD proposes to renew all expiring Section 8 contracts. Last year, HUD's budget described the crisis posed by expiring Section 8 contracts. With HUD's vigorous support, Congress included sufficient resources in the Balanced Budget Act to renew all expiring contracts through 2002. In addition, Congress enacted landmark legislation to restructure the contracts of private owners of Section 8-assisted housing. This legislation will stop paying landlords excessive rents, while restructuring their mortgages.

The FY 1999 budget requests $7.2 billion to renew Section 8 contracts covering 2 million units expiring in 1999. This continues HUD's clear policy to continue to renew all contracts that expire. To reduce our request for new budget authority for renewing Section 8 contracts in 1999, HUD will first use $3.7 billion in Section 8 reserves being held in the Section 8 Preservation Reserve Account.

However, with an ever-growing pool of contracts expiring annually and with the restructuring of much of the project-based inventory, HUD expects to see some increase in the numbers of owners who are dropping out of the Section 8 project-based programs. HUD is requesting $373 million to protect tenants who are displaced or face rent increases as a result of restructuring actions.

4. HUD's Investments in Public Housing

Over the last 50 years, the Federal government has invested billions of dollars into the construction and operation of the 1.4 million units of public housing. In most communities, it is well-managed and provides decent quality housing for poor families who cannot afford private market housing. Public housing units represent one-third of all housing that is affordable to families with minimum-wage incomes.

But in too many communities, public housing is found at the heart of urban communities plagued by deterioration, crime and drugs. Critical mistakes were made in the design, construction and maintenance of many of these public housing developments.

The Clinton Administration has worked for five years to implement a physical and social transformation of public housing. At its heart, this transformation requires the demolition of the worst public housing developments. To replace these developments, HUD has created a new mold for public housing: mixed-income, mixed-finance projects which blend into their neighborhoods. HUD has sought and will continue to seek enactment of comprehensive legislation that will provide responsible deregulation of the public housing industry and new tenant rent rules that encourage and assist tenants to move from welfare to work. Finally, HUD is developing new real estate assessment and enforcement capacities to fix the most troubled housing agencies and create incentives for good performance.

HUD's FY 1999 budget supports the continued transformation of public housing while maintaining HUD's financial investment.

a. HOPE VI. The Department is requesting $550 million for the Revitalization of Severely Depressed Public Housing Program, commonly referred to as HOPE VI. The Department has set a goal of approving the demolition of 100,000 blighted or obsolete units by the year 2003, and providing essential replacement housing in their place.

In 1999, the Department plans to approve an additional 15,000 units for demolition and will fund 14,000 replacement units, of which 4,000 are "hard" units and 10,000 are tenant-based rental assistance. By the year 2000, a total of 99,670 replacement units will be funded. The hard replacement units will be incorporated into economically diverse communities to foster more stable communities. HUD is committed to changing the patterns of social and economic isolation, high concentrations of very low-income families, and segregation.

b. Public Housing Capital Fund. The 1999 Budget requests a total of $2.55 billion for 1999, an increase of $50 million over the 1998 enacted levels. This increase will help reduce substantial backlogs of public housing capital improvement needs. Capital funds may be used to upgrade viable housing units, demolish obsolete units, provide continued assistance to displaced families or build replacement units.

The Department is proposing that up to $100 million be used for technical assistance, contract expertise, and training and intervention with respect to troubled housing authorities. Funds will be used to increase inspections of public housing properties, and to assist in efforts to turn around troubled agencies.

c. Public Housing Operating Fund. HUD requests $2.818 billion for the Public Housing Operating Fund in FY 1999. When supplemented with $113 million in anticipated carryover funding, available Operating Fund resources will be $2.931 billion. This level represents a $31.6 million increase over FY 1998 levels and will enable the Department to meet its commitment to fund 100 percent of the amount established by the Performance Funding System (PFS).

These operating subsidies provide support to approximately 3,200 PHAs nationwide to ensure that a reasonable level of services are provided to residents. Typical services include maintenance, utilities and protective services. Federal subsidies make up about 60 percent of operating expenses, the remainder being derived through rental receipts.

d. Drug Elimination Grants. HUD proposes that $310 million be appropriated for Drug Elimination Grants again in 1999 for anti-crime, anti-drug and clearinghouse information services. Eligible activities include the employment of security personnel, reimbursement of local law enforcement agencies for protective services, enhanced security through physical improvements and drug prevention, intervention and treatment programs.

Funding also includes $20 million for Operation Safe Home. Operation Safe Home is an effort to combat violent crime in public and assisted housing and is administered by the Department's Office of Inspector General in close coordination with local and federal law enforcement authorities. The program establishes coalitions to implement a coordinated fight against gang and other criminal activity.

5. Tenant Choice in the Section 8 Program

The Secretary is also requesting $20 million in new funding for Regional Opportunity Counseling (ROC) in the Housing Certificate Fund. This program is targeted to reducing concentrations of poverty by helping an estimated 13,000 families in 10 to 20 metropolitan areas choose housing in low-poverty areas. Funds will be awarded by competition to collaboratives of housing authorities and non-profit organizations.

These collaboratives will develop specific strategies to help move individuals to areas with low-poverty rates. Examples of eligible activities include; landlord outreach, motivational counseling, training in household budgets, direct search assistance, payments to landlords, assistance with security and utilities deposits.

In addition, the Secretary is requesting a small set-aside within the Housing Certificate Fund to reward public housing agencies that successfully reduce the poverty concentration of families using portable tenant-based assistance. Research suggests that families moving from high poverty to lower poverty neighborhoods can access better schools and better jobs, and ultimately improve life outcomes for children.

The 1999 budget sets aside $8.75 million in Section 8 funding to provide administrative bonus fees to PHAs if agreed upon targets are achieved. The program is modeled after a successful pilot conducted in Chicago, where a private contractor is managing the tenant-based Section 8 programs.

6. Native American Housing Block Grant

HUD requests $600 million for the Native American Housing Block Grant. This funding level is critical to maintain and expand affordable housing opportunities for Native Americans.

Federal aid plays a critical role in providing affordable housing for Native American populations. Presently, almost 45 percent of all low-income households in tribal areas are served by HUD assisted housing units. Of the estimated 69,000 units assisted, 32 percent are in the rental program. For the Native American Indian and Alaskan Native areas, the 1990 census reported an unemployment rate of 20 percent and a poverty rate of 36 percent.

The program operates as a block grant to eligible Indian tribes or through their Tribally Designated Housing Entities. Funds can be used for a wide variety of activities that will increase the availability of affordable housing. These include: new construction; repair and rehabilitation and related services; operating assistance for existing housing units; counseling for renters; and supportive services and crime prevention.

In addition, HUD proposes $5 million for a new Native American Housing Loan Guarantee program. Modeled after the CDBG Section 108 program, these loan guarantees will allow tribal housing agencies to pledge future block grant funding for leveraging private sector investments. Up to $75 million in loan activity could be supported.

7. Housing for the Elderly and Disabled

HUD proposes $333 million for Housing for the Elderly and Disabled, and would shift administration from HUD to state and local governments through the HOME program. While maintaining the integrity of the Section 202 and Section 811 programs, the shift of the program into HOME will allow the Department to further consolidate its program structure, and provide substantial opportunities for state and local participating jurisdictions to leverage additional resources for elderly and disabled housing. HUD intends to submit a legislative proposal to accomplish this consolidation.

In addition, HUD's funding for the elderly includes an additional 8,800 new incremental vouchers. These vouchers replace direct grant funding and allow HUD to serve a greater number of elderly households with more limited resources. When grant funding and vouchers are taken together, the total number of assisted units for the elderly increases from approximately 8,500 in 1998 to approximately 10,300 in 1999.

8. Low Income Housing Tax Credit

The President's budget also includes a proposal to expand the Low-Income Housing Tax, a critical source of equity for the construction of affordable rental housing. Under the proposal, the per capita cap on state allocations of tax credits will increase from $1.25 to $1.75. This expansion will help develop an additional 150,000-180,000 affordable housing units for the next five years at an additional cost of $1.6 billion.

Content Archived: January 20, 2009

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